ROCKVILLE, MD (September 22, 2016) – A new study highlights Frederick County’s recent decision to subsidize a massive hotel development by raising taxes on its competitor hotels.  The decision raises questions about whether county governments should be picking winners and losers in the local marketplace.  The full report, which was authored by Maryland Public Policy Institute Adjunct Fellow Peter Samuel, can be found at mdolicy.org.

On August 30, the Frederick County Council voted 4-3 to raise the hotel rental tax from 3 percent to 5 percent and dedicate a portion of the proceeds to a small number of new full-service hotels and conference centers, notably the county’s flagship proposal the Downtown Hotel & Conference Center (DH&CC).  The new law allows the DH&CC to receive back up to 85 percent of the hotel rental tax it pays.  The council’s vote means self-financed hotels across the county must now pay more in taxes in order to subsidize elected officials’ favored project, the DH&CC.

“Frederick politicians have put their thumbs on the economic scale at great cost to local small business owners,” said Christopher B. Summers, president of the Institute.  “The precedent is set for future county developers to lobby for handsome taxpayer subsidies that lower their financial exposure while potentially driving self-financed competitors out of the marketplace.  It’s good business for them, but bad policy for Frederick County.”  

“By no one’s estimates will real customers generate the revenues to support the $84 million hotel complex, which raises the important question of why other small businesses are being forced to subsidize it,” said Peter Samuel.

View the full report at mdolicy.org.

About the Maryland Public Policy Institute: Founded in 2001, the Maryland Public Policy Institute is a nonpartisan public policy research and education organization that focuses on state policy issues. The Institute’s mission is to formulate and promote public policies at all levels of government based on principles of free enterprise, limited government, and civil society.  Learn more at mdpolicy.org.

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